Supervision questions:
- Answer the following using a simple diagram and/or formula as appropriate:
- Explain the different elasticity concepts (own-price, cross-price, income)
- Distinguish between inelastic and elastic demand curves, give examples of goods for which demand is elastic and for which demand is inelastic.
- Distinguish normal, luxury and inferior goods.
- Define and distinguish consumer and producer surplus.
- Define short run marginal cost (SRMC), average variable cost (AVC) and long run average cost (LRAC)
- Show that the minimum of the SRAC curve is not usually on the LRAC curve
- Distinguish constant, decreasing and increasing returns to scale, give examples of industries which exhibit each of these returns to scale.
2. The following table shows information about the United States coal mining industry.
| Real Price of Coal (1970-73=100) | Coal Output
(1970-73=100) |
No. of Pits | No. of Miners | |
| 1970-73 | 100 | 100 | 3365 (i) | 155000 |
| 1974-77 | 152 | 112 | 5275 (ii) | 242000 |
| 1978-80 | 145 | 129 | 5425 (iii) | 253000 |
| (i) 1972 data | ||||
| (ii) 1977 data | ||||
| (iii) 1979 estimate |
- How can you account for the patterns shown in these data?
- What other information would you need to confirm your analysis?
- With reference to the work of one distinguished economist, discuss what lessons economic analysis can have for a manager in business environment.
Supervision material:
Additional resources:
Khan academy video on elasticity: here